The cacophony of half truths never relent, this is especially true for the discipline of economics. The adults that make up the White House Press Corps., journalism and hosts of other digital media never seem to get around to acknowledging intrinsic sequencing for economic growth. Instead we get reams of semi-informed voices ranting about secular stagnation, sticky wages etc. . while never really addressing the sources of wealth creation.
Let’s set the record straight: real economic growth comes first, then wages. This sequencing is chiefly derived from productivity gains; both have their source in sound monetary, fiscal policy. Whatever increases productivity, adds to economic growth, these include: additions to capital stock, education/skills, applied technology and finally institutional changes that procure and solidify policy incentives. In a sentence, anything that creates economic freedom.
We haven’t had this policy driven cycle since Reagan. The Federal Reserves ZIRP has deprived interest bearing income to millions of American’s, consequently discouraging both investment, savings and growth. Instead, we’ve seen govmint policy aiming to encourage taxpayer provided benefits that discourage growth.
Let’s remember the whole virtuous cycle begins with getting, implementing the right policy ideas, the right sequencing of fiscal, monetary policy coordination.